Papers Relating to the Foreign Relations of the United States, 1917, Supplement 2, The World War, Volume II

File No. 763.72/4346

The Ambassador in Great Britain ( Page) to the Secretary of State

No. 6095

London, April 19, 1917.
[Received May 4.]

Sir: With reference to my telegram No. 6006 of April 16, 4 p.m.,¹ I have the honor to enclose herewith the copy of a note from the Secretary of State for Foreign Affairs, dated April 10, 1917, transmitting seven memorandums containing certain proposals which have been telegraphed to the British Ambassador at Washington as being the chief questions, in connection with trade and transport, to which the British Government ventures to suggest that our Government should first direct its attention.

The memorandums summarize telegrams which have been sent to Sir C. Spring Rice.

I have [etc.]

Walter Hines Page

[Enclosure]

The British Secretary of State for Foreign Affairs ( Balfour) to the American Ambassador ( Page)

No. 72539/X

London, April 10, 1917.

My Dear Ambassador: 1. I should like to put before you certain proposals which I have telegraphed to Sir C. Spring Rice as being the chief questions, in connexion with trade and transport, to which we would venture to suggest that the United States should first direct their attention.

2. I need hardly say that we have no wish to urge premature action upon the Government of the United States with regard to such delicate and complicated matters, but it seemed to me that an early formulation of the most urgent needs of the Allies could not fail to be of guidance to that Government.

3. I annex memoranda summarizing our telegrams to Sir C. Spring Rice. Besides these telegrams, I have of course informed him fully of the questions dealt with in Sir Adam Block’s recent correspondence with Mr. Laughlin in regard to financial matters; of our arrangements in regard to the statutory list and the black lists embodied in Mr. Leverton Harris’ letter to Your Excellency of April 6th and Lord Robert Cecil’s letter of April 7th; and of the substance of my recent letter to you in regard to shipping and other matters.

Believe me [etc.]

Arthur James Balfour

[Subenclosures]

Memoranda Summarizing Telegrams from the British Secretary of State for Foreign Affairs ( Balfour) to the British Ambassador at Washington ( Spring Rice)

Memorandum I

1. In addition to the measures sketched in the two memoranda communicated to Mr. Laughlin by Sir Adam Block, the entry of the United States into the war raises a question of financial policy of the first magnitude. There are many neutral banks, both in Latin America and in Europe, which are known to be actively assisting the enemy by granting credits as well as in other ways. The Allies have enforced regulations which prevent any such transactions being effected through their own financial markets, but so long as the great financial market of the United States remained open to these neutral banks, it was, for obvious reasons, difficult for the Allies to deny to them all Allied facilities for their business as a whole. If, however, the United States is now prepared, in the common interest, to cooperate with the Allies for the purpose of restricting the neutral financial channels now being used by the enemy, it would become possible absolutely to close all the chief financial centres of Europe and America to any neutral bank engaged in upholding enemy trade or credit, and there can be little doubt that such banks would prefer, in these circumstances, to restrict, if not entirely to sever their financial connexion with the enemy. The extent to which, and the methods by which, such pressure could justly and efficaciously be applied to each particular case would have to be carefully and cautiously considered, but it would be of advantage if the United States Government could without delay decide whether they are prepared in principle to adopt such a policy.

Foreign Office, April 10, 1917.

Memorandum II

1. As the United States Government naturally and rightly desire themselves to assume control over the trade of their own citizens and as it is to the interest of the Allies that, as in other belligerent countries, such control should be based upon the exercise of national sovereignty rather than on the less certain application of international law, it is hoped that the United States Government will give early consideration to the advisability of prohibiting the export of all important commodities except under licence. As a complement to such a list, and as a guide to the licencing authorities, it will no doubt be necessary for the United States to adopt also, in one form or another, a list of consignees in neutral countries who are to be regarded as undesirable recipients of American goods. For obvious reasons, which have already been recognised by all the Allies, it is desirable that both the list of prohibited exports and the lists of “suspects” should be as nearly as possible identical with those adopted by the Allied countries, and consultation and collaboration for this purpose with the Allies will, no doubt, recommend itself to the Government of the United States.

Foreign Office, April 10, 1917.

Memorandum III

1. In instituting a system of export licences, the United States Government will doubtless wish carefully to consider the accumulated information now in possession of the Allied Governments in regard to the trade affiliations of firms in neutral countries and in regard to the quantities of goods of various classes needed by neutral countries for their own consumption. The Government of the United States is, of course, aware to how large an extent these two classes of information have been utilised, in administering the system of letters of assurance issued by the trade department of the British Embassy at Washington in the case of exports to Scandinavian countries. This system has been supplemented, in the case of exports to other neutral countries, by a carefully regulated maritime control based on the same information. The discrimination between neutral consignees, and the “rationing” of neutral countries, thus established, have now been embodied in a network of international agreements, the disturbance of which would be as unjust to various neutral interests as it would be detrimental to the interests of the Allies. There will be little difference of opinion as to the need for proper coordination between the machinery for issuing American export licences and the methods of trade control hitherto followed by His Majesty’s Government and their Allies. The extent and method of such coordination is a matter for discussion, but the United States Government will no doubt realise how desirable it will be, from every point of view, that the licencing authority to be set up in the United States shall not conflict with the machinery now in operation, just as His Majesty’s Government most keenly realise that the continued operation of that machinery must not conflict with the sovereign powers of the United States Government.

Foreign Office, April 10, 1917.

Memorandum IV

1. The most urgent need of the Allies is, of course, shipping. The general lines on which these needs can best be satisfied have already been fully explained, but there are one or two elements of organisation which have been found necessary in every belligerent country in order to establish the necessary control over the employment of tonnage. The United States Government will doubtless consider the advisability of the following measures:

(1) The establishment of control over the whole American mercantile fleet with a view to the employment of American ships, under licence, in those services which will best conduce to the successful prosecution and early termination of the war.

(2) The establishment of complete control over the export and supply of American coal. This would imply the prohibition of the export of the coal except under licence, whether in the form of cargoes in bulk or in the form of bunkers. Perhaps the most convenient model for such a system is that followed by the British Government. The British organisation, as gradually built up, involves in practice, besides the prohibition of the export of coal, the setting up of a list of undesirable consignees for coal abroad, and a list of reliable ships similar to the British “white list.” Here again, the necessary discrimination between various ships must rest upon the nature of their trade, and therefore upon the formulation of a proper list of undesirable neutral traders such as has already been mentioned in Memorandum II.

2. The coal policy of His Majesty’s Government has pursued a threefold object:

(1) It endeavours to secure an adequate supply of coal to the Allies.

(2) It aims at preventing coal falling into the hands of enemy countries or firms working for the enemy, such, for instance, as the German coal dépôts in South America (South America took over two million tons of American coal in 1916).

(3) It attempts, by withholding—or threatening to withhold—coal supplies, to impose upon neutral governments or shipowners such conditions as to the manner of employing their ships as shall be most advantageous to the Allied interest.

3. Neutral countries largely or entirely dependent on British coal have been able to some extent to evade this control by obtaining coal from the United States. Both Norway and Sweden obtained considerable quantities of coal from the United States in 1916. This difficulty would cease if the supplies from the United States both to Europe and to Latin America were regulated according to the same general principles as are applied in the case of British coal.

4. It is understood, from reports received from Sir C. Spring Rice, that the United States Government propose to adopt a restrictive policy in regard to coal and if His Majesty’s Government may rely on the enforcement of adequate measures on these lines, they would be quite prepared to suspend the bunkering conditions hitherto applied to United States ships trading with South America, as those conditions would have become superfluous and the objects aimed at by them would be more adequately met by the operation of United States sovereignty.

Foreign Office, April 10, 1917.

Memorandum V

1. The granting or withholding of insurance in respect of transactions operating to the benefit of enemies, is a vitally important element in any control over shipping. The policy of the Allies in this respect has hitherto been much weakened by the fact that any refusal of insurance would, in many instances, merely result in transferring the insurance to American companies, several of which are associated with German concerns. It is assumed that, in pursuance of the American common law against trading with the enemy, the United States Government will intervene to prevent insurance business being done by American firms on behalf of or in the interest of the enemy. The Allies would undoubtedly welcome the closest co-operation between American insurance companies and the insurance organisations in Allied countries, and as a first step to this, it might be advisable to consider the formation of a representative and responsible committee of insurance experts in the United States who would be in touch with the corresponding responsible body here.

Foreign Office, April 10, 1917.

Memorandum VI

1. It is understood that certain amendments to the shipping bill may be introduced into Congress by the responsible administrative body which might hamper the free employment of ships built, or now building, in American ports to the best advantage of the general interests of all the countries now united in fighting the German menace. Without any desire to comment upon or to interfere with the action of the American Congress, it may be pointed out how deplorable it would be if any provisions were enacted which would prevent the employment of any ships in the way best calculated to further Allied operations. The United States Government will no doubt see the advantage of not allowing any ships building in their ports to pass under the control of a neutral in the present very serious state of Allied tonnage. But on the other hand, it seems to be a policy of doubtful wisdom in the common interest to restrict the delivery to Allied shipowners of ships building for their order in American ports. His Majesty’s Government cannot but view with the greatest sympathy and approval, the well known efforts of the Government of the United States to increase their mercantile marine and to build up the merchant service needed to man it, for a large and efficient American merchant fleet will be of inestimable value in the difficult days of reconstruction after the war. The United States may be willing to consider whether, in reliance upon this sympathy, they would not be well advised to avoid any legislation calculated to delay the immediate putting into commission of merchant ships in United States ports during the period when the new and increased merchant service of the United States is in course of development. If His Majesty’s Government can give any assistance by providing crews or taking over vessels built in American ports for the period of the war, they would of course be glad to do so under any conditions which may be mutually agreed upon in the interests of the American mercantile marine.

Foreign Office, April 10, 1917.

Memorandum VII

The question of the world’s supplies of cereals and animal feeding stuffs is a very grave one, from the point of view both of the size of the available stocks and of the tonnage available to transport them. It seems only fair and just that the Allied countries should have first call upon those sources of supply which lie nearest to them, and, after them, those neutral countries whose tonnage is to a large extent employed in services beneficial to the Allies. Those other neutral countries which forbid or discourage their shipping from engaging in such services might in justice be required to employ the ample national tonnage which they have thus reserved for themselves, in transporting their supplies of grain and fodder from more distant markets such as the Plate, Australia or India. The advantages which the Allies would thus gain both in saving tonnage and in increased certainty of supplies cannot be exaggerated and it is suggested that, in the circumstances, there would be ample justification for a prohibition of the export of cereals and feeding stuffs from the United States to neutral destinations except under licence. The United States Government would thus be able to establish a control over the movement of such exports in accordance with the best interests of all those who are united in the contest against Germany.

Foreign Office, April 10, 1917.

1. Not printed.